For Technology and Startup companies, developing a policy Paid Time Off (PTO) or Vacation for your team is less about compliance and more about attracting and managing the best talent.
As you’re growing your team, the way you track and manage PTO and vacation days will likely change - after all, when you’re a team of 3, it’s pretty easy to stay on top of everyone’s vacation plans, but in a team of 50…?
In this article, for each stage of your business growth, we’re going to go through:
Each state will potentially have its own minimum requirements for paid and unpaid employee leave which you’ll need to adhere to, based on where your company is located or registered (or potentially where your remote workers live).
In California, for example, most of the legislative requirements only kick in once you hit 25 employees, so if you’re a small team based in California, you can likely get away with a simpler policy than your local Walmart.
It’s also worth checking for federal requirements, such as the Family Leave Medical Act (which covers unpaid leave requirements for certain emergencies) and the Fair Labor Standards Act (which covers a few very specific types of leave), as these will affect all businesses.
With 5 or fewer employees, you’re probably going to be pretty closely working with each other.
Firstly, ask yourself: does it really matter when your employees take time off, or is it better to give them the freedom to choose?
This will depend on the role, but you may be able to save a lot of headaches and really motivate the team if you can avoid implementing a strict PTO policy. It could be as simple as “just let me know when you need time off and if it won’t impact things too much, there will be no problems” for a developer, or it may require more forward-planning for a systems administrator, but the key is to keep things as simple as possible so that you’re not creating unnecessary admin work for yourself or your employees.
An Unlimited PTO Policy allows employees to take as much paid time off as they need, so long as their job is still completed to a high standard. It’s only adopted by 4% of US companies in 2020, according to a survey of 1021 employees by VacationRenter, but it can be super effective for small startups as you’ve likely got a small team of highly motivated individuals at this size anyway - especially if they’re equity-holders. They’ll appreciate the flexibility and the mutual respect this shows.
That being said, it’s still very important to track all PTO, vacation, and sick days for three main reasons:
Tip #1: Use a shared calendar. You can make one specifically for time off or you can just share everyone's calendars depending on the level of privacy your team will need.
Tip #2: Use your PTO data. For example, if you find most employees really want Friday afternoon off, you could consider advertising a perk of "half day Fridays" for all employees as a great motivator for attracting and retaining talent. Similarly, if September if a time when everyone wants a break but it's busy for your business, you may want to setup some rules for PTO in September to prevent staff shortages.
The easiest way to track PTO and sync with your calendars is to use our PTO and Vacation Tracking Software, Bindle, as it’s all automatically tracked and can be managed by employees directly (so you won’t have to manually track everything yourself.
As your team grows, you’ll likely start to break into separate teams. This is where you have the perfect opportunity to experiment with different PTO strategies to reap the benefits and see what is most effective.
For example, perhaps you allow your sales team to take PTO whenever they want to, as they’re working on commission, whilst you implement a PTO “Bank” Policy for you Customer Success team with an approval process, as they’re needed for specific hours providing support.
A “PTO Bank” policy is a policy where you provide a set number of total PTO days for employees, which can accrue daily, monthly or annually to cover anything from vacations to sick leave, or whatever else they want to take time off for. The idea is that you’re simplifying your paid leave policy and reducing the overhead around tracking individual types of time off.
Alternatively, you could implement a separate number of days for sick leave, but allow teams to have different policies for vacations based on the role requirements, which is more of a “Traditional” PTO policy.
The key is to keep it fair and practical, as giving one team unlimited vacation leave and another no vacation leave will obviously lead to some resentment, but giving one team more flexibility to choose when to take their leave if it just makes sense is perfectly reasonable.
Be sure to provide as much PTO as other similar businesses (or perhaps more) as it’ll be perceived as a strong perk by existing and future employees.
To make this strategy work, you’ll need two things:
It’s easy to give team managers the ability to approve leave within Bindle and to configure a PTO bank, or a more traditional policy for your team.
To help develop a PTO bank policy (if that’s the way you want to go), we’ve built a free PTO and vacation policy generator which you can use.
Now that you’ve (hopefully) been tracking how your employees take time off for a while, you should have an idea of what works for your business and what doesn’t.
You will need to comply with more legislation at this size than smaller businesses, so it’s worth checking state and federal sources for what’s changing, as it will depend on your industry and your location.
Ultimately, your choices will come down to:
Beyond these broad choices, the real key is deciding:
In general, if you want to be seen as an employer of choice in the tech and startup space, be as generous and flexible as you can be. Don’t make 3 levels of approval for a day off if you can get away with one, and remember that if you don’t offer a decent PTO policy to your best employees, your competitors can use that to poach your top talent.
It’s also important to encourage employees to take that PTO to manage their mental health and prevent the dreaded burnout we commonly see in all industries but particularly tech and startups.
According to the survey performed by VacationRenter, employees say the most helpful actions companies can take to encourage PTO use are:
Beyond that, it’s very much a cultural choice. If you have a workplace where those who take vacations are shamed, you won’t get as many employees using them and will suffer employee turnover and productivity losses as a result.
If you instead talk about vacation plans openly and with interest, you’ll normalize taking Paid Time Off and have a much more positive (and productive) workplace.
If you’ve gone through the previous stages, you should by this stage have an effective way to:
One additional factor to consider as your business grows is your accumulated leave liability. This is particularly important if you’re looking to sell the business, as this is seen as a liability on your balance sheet. You can minimise this liability by either:
Beyond this, employees’ expectations are constantly changing with the times (particularly for tech and startup businesses), so it’s important to keep an eye on:
One final note about remote workers, if you employ any - remember that even though most work from home, they are still working from home and need just as much PTO as any other employee.
You may have a different policy for remote workers, but don’t neglect them!